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How To Deal With CRA Collections

July 29, 2020

CRA Collections has very strong and very broad powers to collect money owed to them? CRA Collection powers include garnishing wages, freezing bank accounts, issuing liens and more. There are ways to deal with CRA collections. Often, its better to seek the help of a tax dispute professional such as Farber Tax.

How the CRA Collects Tax Debt

If you owe money to the Canada Revenue Agency (CRA) you might think that this debt is just like any other debt. Unfortunately, this is not true. Unlike other creditors, the CRA has very strong and very broad powers that it can use to collect tax debt.

Not only does the CRA have strong powers, but their Collections Department is especially aggressive in using them. Communicating with the CRA can be frustrating and time-consuming in the best of times, but if you owe money, the situation gets worse. While other creditors may be willing to accept a lower amount rather than risk you defaulting on the loan, the CRA is empowered by laws to collect on your debt. Not only does it mean that they agency will never take less than is owed to it, but it also means it will negotiate differently than any other creditor you might have. Most likely, the CRA will be much more aggressive when it comes to working out a payment plan.

Dealing with CRA Agents

Since CRA agents know that the agency has very strong powers, they use this as a way to influence negotiations. If you know that the CRA debt collections process could involve freezing your bank account, garnishing your wages, or seizing your assets, you’ll be a lot more likely to agree to nearly anything that prevents this from happening. The result is that a lot of taxpayers accept terms that don’t make financial sense for them because they’re hoping to avoid CRA collections action. Unfortunately, this can mean serious financial trouble. If you agree to an arrangement you can’t afford, you could end up getting into debt trouble (such as running up your credit card to pay your other expenses) while trying to make the required payments to the CRA.

Even if you’re able to come to a deal, the CRA often requires significant financial disclosure if you are looking to pay your tax in installments. This can make working out CRA payment plans quite difficult. Once the agency knows how much you earn and spend each month, it could demand a lot from you. For instance, the CRA may think that you are paying “too much” on your other debts, and demand that you make only the minimum payments, so you can give more to the CRA. This can get you into trouble however, as making only minimum payments can be very costly as you’ll pay a lot in interest.

The same is true for paying corporate tax in installments. The CRA will be very aggressive and difficult to deal with. The agency knows how powerful it is and won’t hesitate to do what it believes it needs to do to get the money it is owed.

When it comes to how to deal with CRA collections and negotiations, it’s best to have a trusted and experienced professional on your side. Our team is made up of legal and ex-CRA professionals who know what it takes to work with the CRA effectively and resolve your tax situation. Contact us today to find out more. We frequently hear from individuals with CRA collection complaints and we know how to deal with CRA collections.

What to do Right Away when Contacted by CRA Collections

If you are contacted by CRA debt collections about your tax debt, one of the most important things you can do is not panic. While this is obviously a stressful situation, it’s important to handle the situation properly and make informed and thoughtful decisions. If you’re panicked or stressed, you’re more likely to make a mistake and that could result in serious trouble.

CRA agents are very tough communicators and negotiators. They fully understand Canadian tax law and CRA processes inside and out. Making an error when communicating with the CRA can leave you in a bad situation.

The easiest way to deal with CRA collections is to pay the tax debt that you owe. The agency wants to get the money is that is owed more than anything else. If you pay your tax debt, the CRA will leave you alone. However, know that if you have had an outstanding debt for a long time, there could be significant interest costs which will increase your amount owing. In some situations, it may be possible to have these interest charges waived or eliminated, but this is only the case in certain situations, and you will need to prove that your circumstances meet the strict requirements.

Don’t worry if you are not able to pay your tax debt in full

If you are not able to pay your tax debt in full, the CRA may be willing to negotiate a payment arrangement. This is a situation where you can make smaller payments over time until your tax debt is paid in full. However, if you make a partial payment or agree to a payment arrangement with the CRA, interest costs will continue to be charged on the outstanding amount. In addition, the CRA is still able to take amounts from any government benefits or credits you are scheduled to receive (such as the Canada Child Benefit) when you have a debt.

Note that you may be expected to provide the CRA with significant financial information before the agency will consider a payment plan. You may be asked to provide details on your income, your expenses, and other financial information.

It is important that you respond to the CRA collections agent when you are contacted. This is because the agency has incredibly strong powers that it uses to collect tax debt that is owed. If you don’t respond, the agency will assume you are not cooperating and could take action against you. CRA collections actions are often very serious and there could be significant financial or legal consequences for you if you don’t cooperate with the agency. If the CRA begins collections actions against you, they will not usually stop these actions until your debt is paid in full or you can prove that the CRA collections actions are causing you undue hardship.

However, working with the team at Farber helps resolve your tax disputes. While the CRA is clearly difficult to negotiate with, our team is comprised of experienced legal and ex-CRA professionals who have the knowledge and skill to solve tax problems. When you work with our team, we will communicate and negotiate with the CRA on your behalf to put an end to CRA debt collections action. Contact us today.

How CRA Collections Works

The CRA is a powerful agency. There are many ways that the CRA can act to collect debt that is owed to it, including:

  • Wage garnishment
    • The CRA is legally allowed to garnish up to 50% of your employment income (and 100% of other income) if you do not pay your tax debt. Of course, this can be a very difficult situation to deal with. Most people would not be able to afford their monthly expenses if they suddenly lost 50% of their income. If you do freelance or contract work, you could potentially lose 100% of your income. Obviously, this would make affording the rest of your life basically impossible.
  • Using money owed to you by another government agency
    • The CRA can take money that is owed to you by other government programs, such as GST/HST credits and childcare benefits, and apply these funds towards your outstanding debt.
  • Freezing your bank accounts
    • The CRA can freeze your bank account and then, after a period of time, the bank will be required to forward your money directly to the CRA. Obviously, if your bank account is frozen, this will make it incredibly difficult to receive income and to pay bills and expenses.
  • Seizing and selling your assets
    • The CRA can seize property that you own, such as your car, your rental property, and even your primary residence. The CRA can then have these assets sold by a court enforcement officer and will use the proceeds to pay off your debt. If this situation occurs, you will have to pay the costs and charges occurred by the CRA for this process.
  • Holding a third party responsible
    • The CRA can hold a third party responsible for your debt, including a business partner or related corporation.

It’s important to note that, if the CRA takes any of these actions and you still have outstanding debt (for example, if the money taken from your bank account or generated by selling your assets isn’t enough to pay your debt in full) you will still owe the outstanding debt.

CRA Statute of Limitations

There is a collections limitation period, which is sometimes known as a CRA statute of limitations. Each tax debt has a six- or 10-year collections limitation. However, this doesn’t mean that you can simply avoid the CRA for 10 years and get away with not paying your taxes. There are various ways in which the CRA can “reset the clock” on the 10-year limitation period. For example, if the CRA takes steps to collect the debt five years after your return has been filed, this resets the clock to 10 years. Also, if a taxpayer chooses to acknowledge the debt through a written promise to pay or make a payment on the debt, this may also reset the clock for the CRA. For these reasons, you should be extremely careful when dealing with your tax debt. Contact our team if the CRA has taken collection action against you or if you believe the agency is going to do soWe can help you understand the law and make sure your rights are respected and protected.

CRA Collection Policies and Procedures

CRA Collection Actions

If a taxpayer does not pay the tax they owe, the CRA can take legal action to collect the debt. CRA collections actions could include:

  • Garnishing your wages
    • The CRA can put a wage garnishment in place without a court order. If the agency sends a requirement to pay to your employer, they will be required to send money from your pay to the CRA to pay off your tax debt. The CRA can garnish up to 50% of your employment income and 100% of income earned from contract or freelance work.
  • Freezing your bank account
    • The agency can also send a requirement to pay notice to your bank without a court order. If this happens, your bank will be forced to prevent you from accessing your account and the money in your account will be applied to your tax debt until it is paid off.
  • Seizing and selling your assets
    • The CRA seize your assets, sell them, and use the money generated from this sale to pay down your tax debt. If this happens, you will be required to pay all reasonable costs and charges that the agency incurs from this process.
  • The CRA can also take money that another federal agency or department owes you (such as Canada Child Benefit payments) and apply this money to your debt.

In the vast majority of cases, these CRA debt collections actions remain in place until the debt is paid in full, unless you are able to prove that these tactics are causing undue harm.

Review a CRA Proposal very carefully

Not only does are CRA collections actions used to collect debt, but agents also use the threat of these actions to influence negotiations. Nobody wants to have their wages garnished, their bank account frozen, or their assets seized. The CRA knows this. If you attempt to negotiate with the CRA (for instance, if you wish to arrange a payment plan and pay your tax in monthly payments as opposed to a lump sum), the agency may propose an arrangement that is very strict. In many cases, taxpayers agree to these strict terms rather than risk CRA debt collections action.

Before agreeing to any plan, the agency will likely request significant financial disclosure. It may ask for information on your income, your expenses, your debt, and more. The agency will then use this information to figure out how much it believes you can pay. A potential issue with this situation is that the CRA considers tax debt to be the top priority. This means it will likely propose an arrangement that sees the debt paid to it as quickly as possible, which could potentially hurt your financial situation. For example, the CRA may require you to pay only the minimum payment on your credit card debt so you have more to give to CRA. This will mean that you will pay a lot more interest on your credit card debt, and that can hurt you financially.

Unfortunately, since the CRA has incredibly strong powers, taxpayers often agree to arrangements they cannot afford because they worry about what the CRA will do if they don’t arrive at a deal.

The Power and Limitations of CRA collections

The CRA is very powerful. Not only can it charge penalties and interest on outstanding tax debt, but the CRA collections department is legally able to take very strong action to collect on debt that is owed. This means that the agency is often very difficult to negotiate with, since it holds so much power.

limitations to CRA Debt Collections Actions

However, while the CRA is certainly a powerful agency, there are limitations to CRA debt collections actions and what the CRA can do.

For instance, there are certain types of CRA collections actions that cannot normally be started until 90 days after the agency sends a Notice of Assessment or Notice of Reassessment. These actions include:

  • Starting proceedings in court
  • Certifying the debt in a Canadian federal court
  • Requiring a third party who owes a person money to make a payment (such as the case of a wage garnishment)
  • Requiring an institution or other third party who is lending or advancing a person money to make a payment (this typically applies in the case of frozen bank accounts)
  • Requiring a person to turn over money

However, these restrictions do not apply when it comes to payments or refundable credits to other debts (such as the CRA seizing payments from other government agencies). Such actions can take place at any time after an assessment or reassessment has been sent.

The 90-day period only applies to debts that occur under the Income Tax Act. For instance, if a taxpayer owes payroll source deductions or GST/HST payments, there is no 90-day waiting period.

As you can see, the CRA is a very powerful agency. While there are certain restrictions on CRA debt collections powers, the agency still has very broad powers and it can use them in many different instances.

If you owe tax debt, it is important that you understand what the CRA can do. Actions such as wage garnishment or asset seizure can be incredibly devastating both financially and emotionally. Not only do these actions cost you money or take away assets that you have spent your hard-earned income on, but CRA collections actions can also cause incredible stress. Plus, certain CRA actions can also harm your reputation.

For instance, if your employer receives a requirement to pay notice from the CRA, they will immediately know about your tax situation. This can hurt you at work, especially if you have a job that requires you to manage money or handle specific details and deadlines. While many people owe tax debt, there is unfortunately still a negative stigma attached to it. Your employer may wrongfully pass judgement on you in this situation and that can hurt your career. The same is true if you do freelance or contract work. In these situations, the CRA can send a requirement to pay notice to your clients. Again, this could potentially harm your reputation.

Avoiding CRA collections actions is important. Contact our team today to find out how we can help. Our team of professionals can communicate and negotiate with the CRA on your behalf to resolve your tax situation.

What Enforcement Actions Can and Does the CRA Take?

CRA collections actions are very powerful and the agency can get people to comply with tax law by threatening such actions.

If you owe a tax debt and do not pay it when it is due, the first step that the agency will take is to charge compound daily interest on the debt. This means that every day that you do not pay your tax debt, it becomes more expensive. This is done to encourage taxpayers to pay their debts as quickly as possible.

The CRA considers debts that are owed to it to be the most important and places a priority on them. This means the agency wants them paid quickly and paid in full.

If you do not pay your tax debt, the CRA can take money is would otherwise be owed to you by another government department or agency. It will then use this money to reduce the amount of your tax debt. For instance, for an individual tax debt, the CRA can take GST/HST credit payments or Canada Child Benefit payments and apply them to your tax debt.

If these options do not result in your tax debt being paid in full, the agency has other powers that it can use. These CRA debt collections actions may include:

  • Issuing a requirement to pay notice
    • The CRA is legally able to redirect money that is owed to you by a third party (such as an employer, a client, or a bank). Once a requirement to pay is received, the person or institution that receives it is legally required to comply. This means your employer will need to garnish your wages and send them to the CRA or your financial institution will need to freeze your bank account and direct your funds to the agency.
  • Registering a lien on your assets or seizing and selling your assets
    • If the agency certifies your debt in federal court, it can register a lien on your assets, including your personal residence. If you sell this asset, the CRA will automatically be paid from the proceeds of the sale and the money will be used to pay your tax debt before you receive any proceeds.
    • The agency can also seize your assets and property (such as your personal residence, your car, your rental property, your boat, and many other assets) and sell them. This money will then be applied to your tax debt. If the agency does not generate enough money from the sale to pay off your debt in full, you will still be required to pay the remaining debt. You will also be responsible for any costs incurred by the CRA during the process.
  • Holding a third party legally responsible
    • The CRA can hold a third party (such as a financial institution, spouse, business partner, director, another individual or a corporation) responsible for paying your tax debt.

For most tax debts, the CRA will not start legal action until 90 days after the mailing date of the notice of assessment or reassessment. The agency will also make one attempt to give a verbal warning by phone and one attempt to send a legal warning letter.

CRA Collections Payment Arrangements

The Canada Revenue Agency is a very formidable agency that has unique powers that separate it from other creditors. For instance, if you owe debt on a credit card and are unable to pay it, you may be able to contact the credit card company, explain your situation, and the company might reduce the amount you owe. This situation often happens with many creditors since they would rather receive some of the money they are owed rather than have you default on the loan. However, the CRA is different.

The CRA will never accept less than the full amount owed in tax debt. This is because the agency has incredibly strong collection powers that it uses to enforce compliance and collect tax debt. Since the CRA knows that it can take significant action to collect debt, it will not accept less than owed.

However, in some situations, the agency may be willing to agree to a payment arrangement. This is a situation where the CRA and a taxpayer agree to a plan that sees the debt paid over a certain period. If you come to a payment arrangement with the CRA, you will likely need to make monthly payments until your debt is paid in full. You will continue to be charged interest on outstanding debt. In addition, even if you come to a payment arrangement with the CRA, the agency is still authorized to take amounts from government benefits and credits as long as you owe tax debt.

Before the CRA will agree to a payment arrangement, it will require significant financial information from you. Also, you will need to show that you have attempted to pay your debt in full and that you have reduced your expenses and/or borrowed funds to try to pay off your debt. The CRA will then use the financial information you provided to determine what you can afford to pay and the length of the arrangement.

A potential issue with this situation is that the CRA considers debt owed to it to be the most important. This means the agency could require you to make only minimum payments on your credit card (for example) so that you can pay your tax debt more quickly. Of course, this may not be a good financial decision for you, and it could end up costing you a lot of money in credit card interest.

If you enter a payment arrangement with the CRA and are not able to make the required payments, the agency is able to take legal action against you to collect the remaining debt.

This means it is crucial to work with a professional when trying to come to a payment plan agreement. The agency uses the threat of CRA debt collections action to pressure taxpayers into agreeing to nearly anything the CRA offers. Working with our experienced team helps level the playing field and get a deal that makes financial sense for you. For more information on how we can help communicate and negotiate with the CRA, please contact us today.

Need Help Dealing With CRA Collections? Talk to a Ex-CRA tax dispute professional for free.

If you owe money to the CRA, do not pay your tax debt, and do not arrange a payment schedule with the agency, it can take severe action against you. CRA debt collections actions aren’t just financially damaging (though they certainly are), but they can also mean significant legal and emotional consequences. Actions taken by the CRA can even harm your reputation, your career, and your personal and professional relationships.

If your employer or client receives a requirement to pay notice, they must send money that was originally supposed to go to you directly to the CRA instead. This means they will become aware of your tax situation. Not only could this harm their personal opinion of you, but it could also jeopardize your career. If your job requires you to manage money or control finances, for instance, having a tax problem could potentially be seen as an issue. If your assets as seized and sold, there is a good chance your family and potentially even your friends will learn of your situations. This could harm your personal relationships.

If you do not pay your tax debt when it is due, the agency can even legally register your debt with the Federal Court of Canada. Not only does this mean that you could be dealing with serious legal problems, but your debt will also then become a matter of public record.

As you can see, CRA collections actions can be devastating. While you’ll obviously want to avoid these actions, if you are already in a situation where CRA debt collections activity has started, you’ll want to have the situation stopped as soon as possible.

In most instances, the CRA will only stop collection action when the debt is paid in full. For instance, if your wages are garnished, the agency will keep the garnishment in place until it has received enough money to cover the full cost of your debt. However, depending on your situation, this means that the garnishment could remain in place for quite some time.

However, the CRA may be willing to stop the collection action if you can prove that it is causing serious financial harm. If you are unable to afford the basic necessities of life due to actions of the CRA, you could have the collection activity stopped. To do this, you will need to prepare a strong case backed up by evidence. The team at Farber can help you communicate and negotiate with the CRA. We begin by looking at your tax situation and determining the best course of action. We will then present this case to the CRA, along with evidence to support the claims. This will give you the best chance at stopping the collection action.

While it’s natural that you will want to stop CRA collections actions as soon as possible, it’s also important that you respond to these actions correctly. The CRA can be incredibly difficult to communicate with and handling the situation the right way is critical. Contact us today to find out how we can help.

Taxpayer’s Rights Under Section 15 of the Taxpayer’s Bill of Rights

Canada has a Taxpayer’s Bill of Rights that defines and explains 16 rights that all taxpayers are entitled to receive. This is an important document as it explains how taxpayer’s rights are protected.

Rights included in the Taxpayer Bill of Rights include the right to receive the benefits, credits, and refunds to which you are entitled under the law and to pay no more or less than is required. You also have the right to be served in both official languages; the expectation of privacy and confidentiality; the opportunity for formal reviews and appeals; to be treated professionally and with respect; to be provided with accurate, complete, clear, and timely information; to have the law applied consistently, to not to pay income tax amounts in dispute before you have had an impartial review; to lodge a service complaint; to have the costs of compliance taken into account when administering tax legislation; to have the CRA be accountable for what it does; to have relief from penalties and interest in extraordinary circumstances; to have the CRA publish service standards; to be warned by the CRA about questionable tax schemes in a timely manner; and to lodge a complaint or request a review without fear of reprisal.

One of the most important rights is stated in section 15 of the Taxpayer Bill of Rights. This section details the right to be represented by a person of your choice. The CRA can be very difficult to negotiate and communicate with. There are many complex and confusing laws and policies in place, and it can be tough to properly navigate them. Section 15 of the Taxpayer’s Bill of Rights states that taxpayers are able to choose a person to provide them with advice on tax and benefit affairs and to represent them in dealings with the CRA. If the CRA is authorized to speak with this representative, the agency can discuss your tax situation with this person.

However, it’s important to remember that, even if a taxpayer chooses to have someone act on their behalf, the taxpayer is still legally responsible for their own tax and benefit affairs.

Section 15 also states that, if you feel your wishes to be represented by a person of your choice are not being respected by the CRA, there is a complaint process in place. You are able to lodge a service complaint and be provided with an explanation of the findings.

When you authorize Farber to communicate with the CRA on your behalf, you are choosing to be represented by professionals who have a full understanding of tax law and CRA processes, including CRA collections action.

The team at Farber always ensures that the rights of our clients are respected and protected. We know that, above all, everyone should be treated fairly and with respect. Your rights are important. Contact us today to find out how we can work to ensure you are treated as you should under the law. Our team is made up of experienced legal and ex-CRA professionals who fully understand Canadian tax law, CRA processes, CRA collections activity, and the Taxpayer’s Bill of Rights. You can trust Farber to be on your side.

What to Do When You Owe CRA Tax Debt: How to Deal with CRA Collections

Tax debt can be difficult to pay off. One reason why is because the CRA charges compound daily interest on outstanding debt. This means the longer you owe money, the more difficult it becomes to pay. What makes the situation even tougher is that the CRA will not accept less than is owed. In some particular instances, the agency may be willing to reduce or even eliminate interest and penalties, but it will not ever agree to a payment plan that will see it receive less than the full tax debt that is owed. If you do not pay, CRA collections actions can start. This means the agency can seize your assets, freeze your bank account, or garnish your wages and use the money it gets from these methods to pay your debt. Obviously, this is not a situation that anyone wants to be in.

Some people believe that it’s best to stay quiet and try to avoid the CRA if you owe money. Unfortunately, this tactic is almost never the best course of action. CRA debt collections agents are very thorough and the agency is incredibly skilled at getting paid when it is owed money. Not only are CRA negotiators experienced, but the agency itself has incredible powers that it uses to collect on tax debt.

The CRA will not simply forget about your tax debt. If you owe the CRA money, it is best to act quickly. After all, you continue to be charged interest on your outstanding debt the longer you go without payment. Also, if you do not respond to the CRA, the agency can take legal action against you. However, it’s not a good idea to act too quickly and do something without thinking.

If you owe a debt to the CRA, the best course of action is to pay it in full right away. However, if that isn’t possible, you’ll want to make sure you act correctly. It’s important to respond to the CRA promptly, but you’ll also want to ensure that you don’t make any mistakes. As mentioned, CRA agents are very experienced and they will quickly pounce on any errors as soon as they spot them.

Whether you are faced with personal tax debt or have a CRA corporate tax payment outstanding, when you’re dealing with the CRA, it’s crucial that you handle the entire process carefully.

The CRA tends to work in confusing and difficult ways and a misstep can be costly. That’s why you’ll want to speak with the ex-CRA professionals at Farber Tax Solutions right away. We have extensive experience and a proven track record of successfully resolving tax disputes. We will work to level the playing field, communicate and negotiate with the CRA on your behalf, and resolve your tax disputes.

Do not jeopardize your financial future and potentially leave yourself open to CRA collections actions and even potential prosecution by the CRA. Work with a team that you can trust. We know to how to stop CRA collections and resolve your situation in the most favourable way possible.